Tennessee Attorney General Bob Cooper recently announced a $550 million joint state-federal settlement with mortgage lender and servicer SunTrust Mortgage Inc. to address mortgage origination, servicing and foreclosure abuses.
The settlement with Tennessee and 48 other states, the District of Columbia, the U.S. Department of Justice, the U.S. Department of Housing and Urban Development and the Consumer Financial Protection Bureau provides direct payments to Tennessee borrowers for past foreclosure abuses, loan modifications and other relief for borrowers in need of assistance, tough new mortgage servicing standards and grants oversight authority to an independent monitor.
“We hope this settlement sends a message to major mortgage servicers that they cannot treat borrowers unfairly without severe consequences,” Attorney General Cooper said.
The settlement’s mortgage servicing terms closely mirrors the 2012 National Mortgage Settlement between the federal government, 49 state attorneys general that includes Tennessee and the five largest national mortgage servicers. That agreement has provided Tennessee with over $200 million in benefits, including loan modifications that have helped homeowners avoid foreclosure by restructuring their mortgage payments. The NMS created tough new servicing standards, requiring the nation’s largest mortgage companies to work proactively and promptly with homeowners facing foreclosure.
The settlement requires SunTrust to provide Tennessee borrowers loan modifications or other relief. The modifications, which SunTrust chooses through an extensive list of options, include principal reductions and refinancing for underwater mortgages. SunTrust will determine which and how many loans to modify within the settlement’s criteria. Because SunTrust receives only partial settlement credit for many types of loan modifications, the settlement will provide relief to borrowers that will exceed the overall minimum amount.
More information about the loan modification process will be released at a later date, though current borrowers with loans serviced by SunTrust can contact the company directly with questions.
More than 2,000 eligible Tennessee borrowers whose loans were serviced by SunTrust and who lost their home to foreclosure from Jan. 1, 2008 through Dec. 31 and encountered servicing abuse will be eligible for a payment from the national $40 million fund for payments to borrowers. The borrower payment amount will depend on how many borrowers file claims. Eligible borrowers will be contacted about how to qualify for payments.
The settlement requires SunTrust to substantially change how it services mortgage loans, handles foreclosures, and ensures the accuracy of information provided in federal bankruptcy court. The terms will prevent past foreclosure abuses, such as robo-signing, improper documentation and lost paperwork. The settlement creates dozens of new consumer protections and standards, including:
• making foreclosure a last resort by first requiring SunTrust to evaluate homeowners for other loss mitigation options.
• restricting foreclosure while the homeowner is being considered for a loan modification.
• new procedures and timelines for reviewing loan modification applications;
Giving homeowners the right to appeal denials.
• requiring a single point of contact for borrowers seeking information about their loans and maintaining adequate staff to handle calls.
The National Mortgage Settlement’s independent monitor, Joseph A. Smith Jr., will oversee SunTrust agreement compliance. Smith will oversee implementation of the servicing standards required by the agreement; impose penalties of up to $1 million per violation (or up to $5 million for certain repeat violations); and issue regular public reports that identify any quarter in which a servicer fell short of the standards imposed in the settlement.
In addition, the settlement resolves potential violations of civil law based on SunTrust’s deficient mortgage loan origination and servicing activities. The settlement does not prevent state or federal authorities from pursuing criminal enforcement actions related to this or other conduct by SunTrust. Additionally, the settlement does not prevent any action by individual borrowers who wish to bring their own lawsuits.
Borrowers should contact SunTrust directly at 800-634-7928 or visit suntrustmortgage.com to determine whether they qualify for relief under the terms of this settlement. A settlement administrator will contact qualified borrowers associated with foreclosed loans regarding cash payments. More information will be made available as the settlement programs are implemented.
For more information about free foreclosure prevention counselors or mortgage assistance programs in Tennessee, struggling homeowners may visit tn.gov/attorneygeneral or call the state’s free mortgage assistance hotline at 855-876-7283 Monday-Friday from 9 a.m. until 5 p.m.